Summary

• AXS, the cryptocurrency for blockchain-based game Axie Infinity, has risen despite impending token unlock.
• Positive market action is attributed to expectation of a positive catalyst from the Axie team.
• Releasing good news along with token unlocks is criticized as unethical.

The value of AXS, the cryptocurrency for blockchain-based game Axie Infinity, has risen by over 40% in the past 24 hours, reaching a four-month high of $13.94, despite the impending unlocking of millions of dollars worth of tokens. This is surprising to some as unlocks are typically considered bearish catalysts that free up liquidity and open doors for investors to lock in profits. Tokens are locked up to prevent big bag holders, usually early investors or even the project's team members, from selling their coins all at once and causing price dumps.

Axie Infinity is a blockchain-based trading and battling game that allows players to collect, breed, raise, battle and trade token-based creatures known as "axies," which are digitized as non-fungible tokens (NFTs). Axie infinity shards or AXS is a governance token of the Axie Infinity game. The latest positive market action may seem confounding, as some 4.8 million AXS tokens ($64 million at the current price of $13.31) – the equivalent of 1.8% of the cryptocurrency's total supply of 270 million – will be freed up later Monday, according to data source TokenUnlocks.

According to Flex Hartmann, managing partner at crypto investment firm Hartmann Capital, the confounding rally results from the hope that the Axie team will announce a positive catalyst to counteract the bearish impact of the token unlock. "Over the last 12 months crypto teams have started building a track record for saving big announcements for unlock days. It's happened so consistently that people now expect a bullish catalyst around unlocks," Hartmann told CoinDesk.

Substack publication Unlocks Calendar recently made a similar observation. "As we experience positive market momentum, teams with upcoming unlocks will release good news that they withheld for months when the market was dead," Unlocks Calendar tweeted on Jan. 14. "The goal would be riding positive market moves to pump the price just before unlocks."

AXS is one of the several cryptocurrencies gaining ground ahead of the token unlock. Decentralized perpetuals-focused exchange dYdX's cryptocurrency has jumped 64% this month, outperforming market leaders bitcoin and ether, despite a looming unlock on Feb. 2. APT, the native cryptocurrency of layer 1 blockchain Aptos, also rallied 40% in the week leading up to its token unlock that took place on Jan. 12. The cryptocurrency's price has doubled to $13 since then.

"The market has become so reflexive that people buy in anticipation of unlock news," Hartmann said, calling the new trend of releasing good news along with the token unlocks unethical. "I view this new trend as fairly unethical as you are creating a buzz to help your investors unload on retail [investors] who are unaware of things like unlocks," Hartmann told CoinDesk.

Some observers have long argued that the impact of unlocks accentuate the prevailing market trend. "Large unlocks of tokens are a complex event that interface with market psychology. Simply put, large unlocks can be bullish catalysts in bulls, and bearish catalysts in bears. They unlock liquidity to continue the prevailing trend," Chris Burniske, co-founder of New York-based crypto-focused venture firm Placeholder tweeted in April 2021, explaining the bullish reactions to token unlocks that took place in early 2021.

Back then, a bull frenzy had gripped the market with bitcoin hitting new record highs almost every other week. The market has seen a bull revival this month, with leading cryptocurrencies bitcoin and ether rallying 35% each. AXS has gained over 100% this month, topping the 200-day simple moving average for the first time since 2020.